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WEALTH MANAGEMENT - All in the Family

Sophisticated technology enters the ultra-high-net-worth market.

FAMILY OFFICES ARE EMERGing from the information Dark Ages of using spreadsheets and other labor-intensive programs to monitor investment performance, family partnerships and money managers. Technology that ties together disparate pieces of data is quickly moving into this high-end segment of the wealth market as the number and size of multifamily offices swells and high-net-worth families grow more comfortable with the idea of a central database of sensitive financial information.

"A family office is not a profitable endeavor that can fund expensive technology, and the ultra-high-net-worth want to keep information close to the vest. In that world it was okay to have an accountant or investment person doing everything in Excel or QuickBooks," says Susan McDermott, director of business development for Rockefeller & Co.'s Integrated Wealth Services subsidiary, which provides back- and middle-office services for family offices, including Rockefeller. "But with the rise of multifamily offices and the use of alternatives and global assets, there is a need for complex data aggregation and reporting."

Bank of New York Mellon Corp. is one big-firm custodian using new technology to expand its footprint in the family-office market. Some clients are testing BNY Mellon's new platform, Private Workbench, which provides information aggregation and customized reporting. The bank, with $60 billion in family-office assets in custody, expects to make the platform available to all family-office clients by year-end.

"The family-office segment is at the intersection of the institutional and private client markets," says Donald Heberle, executive director of the family-office and charitable-planned-giving groups at BNY Mellon Wealth Management. "These clients are big enough to use institutional products, but they are taxable individuals who need a different platform."

In addition to providing customized reporting that can be accessed by multiple family members, Private Workbench helps clients manage the increasingly popular partnerships in which trusts from different branches of a family invest collectively, thus securing lower fees and central management oversight. The platform enables users to view the details of these partnerships and their holdings on a trust-by-trust basis and offers exception reporting, such as alerts when the family's exposure to a particular stock surpasses a predetermined limit, prompting a need for rebalancing. Private Workbench also provides tax, cash-flow and balance-sheet reporting.

One of the advantages the technology can offer to family offices, Heberle says, is the ability to aggregate information held in custody at parent BNY Mellon Corp. BNY Mellon is the world's biggest custodian, with $21 trillion in assets under custody and administration (29 percent of the $72 trillion held in custody worldwide), which means the wealth management group can report on assets held at other banks, insurance companies and brokerages.

"Think about what family offices do now," says Heberle. "These people are largely managing off spreadsheets, reconciling to custody and banking statements and calculating investment performance themselves." He adds that many families have non-U.S. investments and need a global custodian to report on and hold assets in multiple currencies and to provide services such as foreign exchange. Heberle says he sees a growing number of family offices that are looking for not only a wealth manager but also the technology that will be offered alongside investment management, estate planning and other services. "We compete on investment management, banking, our fiduciary expertise and the custody and technology platform that is wrapped around all that," he says.

Other providers are also seeking opportunities in family offices' increasing interest in new technology. Fidelity Investments has been talking about offering a platform for family offices for a couple of years. A Fidelity spokesman says the firm has been testing its technology with a number of clients since last year, but he declined to identify them. He expects Fidelity to roll out its platform to other family-office clients soon.

Rockefeller, which allows family-office clients to use multiple custodians, is eager to distinguish itself from the BNY Mellon model, which offers access only to the assets it holds. "Our families can custody their assets at a number of places," says McDermott.